Why Run a Slum If You Can Make More Money Housing the Homeless?

In contrast to Bloomberg’s customarily technocratic, market-based approach to governance, the shelter system is ruled by opaque deal-making and informal handshake agreements. Quality varies wildly. Some shelters are run by respected nonprofit social-service agencies, others by private companies, which operate with startlingly little oversight. “The for-profit guys come and buy a hotel, empty it out, and say to the city, ‘Hey, we can get you the rooms tonight,’ ” says George Mc­Donald, founder of the Doe Fund, a nonprofit shelter operator, and a recent candidate for mayor. “It’s all about business, and it’s big money. It’s not nickels and dimes; it’s hundreds of millions of dollars.”

The city government does not publicize the addresses of shelters, citing the privacy of its homeless “clients.” But a list obtained via a Freedom of Information request suggests the industry is dominated by a handful of competitors. There’s Shimmie Horn, whose father, a notorious slumlord, willed him an empire of hotels. There is a consortium of investors who administer a portfolio of tenement shelters from an unmarked office above a Brooklyn laundromat. Most players operate through shell companies and front men, obscuring their interests, and the Podolskys are particularly secretive. But the evidence suggests the family is among the largest shelter providers, and they are expanding aggressively.

Altogether, public records indicate that the Podolskys own or control close to 40 shelter properties, which house at least 1,300 homeless families, about 11 percent of the city’s total. (Families now make up the vast majority of the homeless population.) A calculation based on city records suggests that the Podolsky-related shelters have generated rents in the range of $90 million since 2010.

The story of the family business traces back to a Coney Island kosher butcher shop and a hardened patriarch. Zenek Podolsky was born in Poland in 1920. Most of his family was killed at Treblinka. He later recounted, in a testimony for the Shoah Foundation, that he survived the Holocaust by working for the Gestapo as a mechanic, then on a crew commanded by the Jewish Police. His job involved traveling “city by city, cleaning out the Jewish neighborhoods after their occupants had been deported. “They gave me a torch,” he said, “and made me in charge of opening up the safes.”

After the war, Zenek and his wife, Fanny, immigrated and opened the shop on Mermaid Avenue. Podolsky spent his workdays cutting meat, evenings at the local Democratic clubhouse, and weekends acquiring Coney Island rooming houses. Between 1970 and 1978, according to a document filed by District Attorney Robert Morgenthau in an unrelated case years later, “almost all were burned down in over 125 suspicious fires.” Podolsky was never charged with a related crime, and he profited when the government condemned the properties for urban renewal.

Podolsky used the condemnation windfall to expand. Every Friday, he and his seven children talked real estate over Sabbath dinner. The family philosophy was summed up by the name of a company it used to acquire one Brooklyn building: Fountainhead Associates. There and elsewhere, the Podolskys clashed with tenants. They also fought with each other: In 1984, Zenek sued his eldest son, Abraham, over ownership of some properties, and the two traded accusations of fraud, forgery, and betrayal. Jay and Stuart took their father’s side in the bitter feud, which resulted in an unhappy division of assets.

Zenek acquired his first Manhattan property, the Belfar Hotel on West End Avenue, for $350,000 in 1980. The city soon brought suit, citing tenant complaints about deficient heat, vermin, and frequent fires, one of which killed a man whose death was classified as a homicide. In a court filing, Jay Podolsky, the building manager, called any suggestion of his involvement in the arson “an innuendo which is totally false,” but the family ultimately paid a fine and agreed to properly maintain the building.

In 1983, the Podolskys and another family partnered to purchase three connected buildings on West 77th Street. What happened next caught the attention of Morgenthau’s office. According to prosecutors, after some preliminary hostilities with tenants, the Podolskys hired “professional vacators,” a gang that traveled Manhattan in a U-Haul truck, rendering buildings unlivable. A leader called “Bear” was allegedly installed as the superintendent, and apartments were filled with hustlers, prostitutes, and junkies. Tenants reported frequent burglaries and harassment. One elderly woman died of pneumonia in an unheated room. The vacators received $600 for each departing tenant. They were friendly with all three Podolskys, prosecutors claimed. When Zenek visited, Bear would wash his Cadillac.

In 1984, Morgenthau indicted the gang and twelve landlords, making front-page headlines. The Podolskys cut a deal to avoid serious prison time, pleading guilty to 37 felonies, including grand larceny and coercion. After Zenek offered evidence in a corruption case against another member of the Coney Island clubhouse, Mayor Koch’s taxi-and-limousine commissioner, and agreed to grant the buildings to the Coalition for the Homeless, he was sentenced to 90 days, his sons to probation. Outraged tenants nearly rioted in the courtroom, the Post reported, shouting, “Scum!”